Gen Z and millennial adults are relying on their parents’ contributions to invest in retirement, offloading monthly bills to them to free up budgets

Financial assistance doesn’t necessarily mean that parents are making contributions to their child’s brokerage account.

“For many younger investors, help with everyday expenses creates financial breathing room that can make regular market contributions possible,” according to MarketWise.

Young investors aged 18 to 34 contribute an average of $492 a month to the market, according to the survey, but one-third say their monthly investing would disappear without family assistance.

But this comes at a cost — for their parents. Almost two-thirds of parents (62%) surveyed by MarketWise say that supporting an adult child has hurt them financially.

If you’ve heard the saying: ‘put your own oxygen mask on first,’ the same principle applies here.

Why the kids aren’t all right

Many parents want to give their kids a leg up on life — and that’s getting harder these days.

Gen Zers and young millennials are facing a challenging job market, where hiring is stagnant and certain jobs are being replaced by AI. On top of it, they might end up graduating with a pile of student debt, as tuition fees continue to rise.

Then there’s the issue of housing affordability. While renting is still cheaper than buying, it’s still pricey: the typical U.S. rent is $1,948 a month (as of August), according to Zillow, while a typical mortgage payment is $3,014.

Either way, that’s a lot of money for a young adult just starting out in their career.

While a general rule of thumb is to spend no more than 30% of your income on housing, for many Americans squeezed by inflation, that’s becoming increasingly difficult.

Even earning an income of $100,000 “can be just barely enough or nowhere near it,” Audrey Emerson, owner of Cents of Joy Financial Planning in Bellingham, Wash., told MarketWatch.

So the kids are staying at home. Nearly a fifth of 25- to 34-year-olds live with their parents or grandparents, according to an analysis of census data by John Burns Research and Consulting (as per Business Insider).

Or, they’re moving back. Nearly three in five Gen Zers and young millennials (58%) have moved back home at least once after living independently, according to a SpareFoot survey.

That may explain why 28% of parents in the MarketWise survey are providing financial assistance to their adult children in the form of rent or housing (28%), as well as phone bills (35%), groceries (21%), car payments (10%), student loan payments (8%) and brokerage or investment account fees (4%).

Nearly half viewed the money they gave their adult children as an investment in their independence — rather than exw3pecting repayment.

But, of the parents surveyed by MarketWise, providing financial support was impacting their own financial health and wellbeing: reducing their own savings or investments (43%), taking on debt (24%), reducing or delaying travel (24%) or postponing a major purchase (23%).

So what can parents do?

Financially supporting adult children while putting your own savings at risk — or going into debt over it — isn’t a long-term approach for success.

In some cases, parents surveyed by MarketWise said they’d delayed retirement, returned to work or took on additional work.

If you do choose to provide financial assistance to an adult child, it can be helpful to create boundaries around the amount and duration of that assistance.

Why? “You cannot take out a loan for retirement. There are no financial aid forms, no payment plans, no do-overs if you run short at 75,” according to a blog by fidser. “Your adult children, on the other hand, have decades of earning potential ahead of them.”

That should inform your decision about how much support to provide and for how long.

For example, fidser says that a $500 monthly transfer “doesn’t feel like much in isolation.” But it translates to $30,000 over five years — money that may be helping your child, but money that isn’t going toward your retirement.

And if you co-sign a loan for your adult child? You’re responsible for that debt if your child can’t pay it back, which then impacts your credit score.